AlJazira Cap says Advanced Q1 2021 exceeds estimates; raises target price to SAR 69

Logo of Advanced Petrochemical Co.

Advanced Petrochemical Co.’s (Advanced) Q1 2021 net income of SAR 171 million came higher than AlJazira Capital’s estimate of SAR 158.4 million.

The major deviation was due to the higher-than-expected volumetric sales, the brokerage said in a report, pointing to higher-than-expected inventory utilization during the maintenance of plants for 20 days.

The company showed resilient operating performance despite the scheduled maintenance and an increase in the feedstock.

Furthermore, petrochemical sector fortunes have improved over the past two quarters due to the strengthening of demand and improved prices. However, the short-term outlook is largely driven by coronavirus vaccines, tight global supply and bullish downstream markets, the report noted.

Going forward, products prices are expected to stabilize around the current level with the pick-up in the global economic activities. The brokerage does not expect a significant improvement during 2021 due to addition in global capacity.

Although Advanced’s plant shutdown has already weighed on operating rate and sales volume during Q1 2021, volumetric sales and operating efficiency are expected to improve going forward due to ramping up of production and higher global demand.

“In the long term, the progress on the new expansion plan will be the key catalyst for the future performance,” the brokerage said.

The company is expected to achieve a net profit of SAR 743 million in 2021, compared to a profit of SAR 596 million in 2020.

AlJazira Capital maintained “Neutral” recommendation on the stock, raising the target price to SAR 69 from SAR 60.5.